Every technology wave begins with excitement.
Every technology wave ends with clarity.
Everything in between is noise, experimentation, overshooting, and consolidation.
AI is now sitting right in the middle of that noisy middle.
From 2022 to 2025, the world witnessed one of the fastest startup booms in history. New AI companies appeared weekly—sometimes daily—promising to reinvent:
Pitch decks declared a future where:
If you squinted, it looked like the future had already arrived.
But underneath the energy and optimism, something predictable was forming—the unmistakable shape of a classic technology shakeout.
This chapter explains why the shakeout is not just possible, but unavoidable.
Not because AI is a bubble.
Not because AI is overhyped.
But because every transformative technology passes through this phase.
AI is no exception.
In:
Adding these words triggered instant investor excitement.
Money flowed.
Startups multiplied.
Founders built fast.
Investors feared missing the next Google.
This always produces:
Everyone wanted to ride the AI wave.
Few asked the critical question:
“Does this solve a painful, expensive, unavoidable problem?”
During overfunding & overcrowding:
Eventually, the market does its natural job:
It corrects, compresses, and consolidates.
Not collapse—
evolution.
AI startups face an economic trap SaaS companies never had:
The more customers use your product…
…the more you owe the model provider.
Every time:
…the startup pays for inference compute.
This is the opposite of SaaS economics:
This produces three unavoidable pressures:
Many AI startups won’t die because the product is bad.
They’ll die because the economics are impossible.
Just as the early internet wiped out many web hosts,
AI will eliminate many compute-dependent startups.
Every platform shift consolidates around a small group:
AI is following the same pattern.
Today, the gravitational center is held by:
They control:
If your startup depends on:
…you are building on moving ground.
As platforms mature, they:
Thousands of AI startups will see their entire product become…
a native platform feature.
Not malice—
gravity.
Platform consolidation always pulls the ecosystem inward.
Enterprises are overwhelmed.
Every week brings:
CIOs are overwhelmed.
Procurement is exhausted.
Security teams are drowning.
Legal teams can’t review fast enough.
Predictably, buyers retreat to vendors they already trust:
Startups lose not due to inferior quality,
but because buyers consolidate.
Buyer fatigue accelerates the shakeout.
Traditional software moats come from:
In AI, moats don’t last.
Today’s “breakthrough” becomes tomorrow’s “checkbox.”
Small AI startups struggle to differentiate because:
Only companies with:
…retain long-term advantage.
The AI shakeout is not unique.
It mirrors every major tech cycle.
History says two things clearly:
Most players won’t make it.
A few players will become generational winners.
This chapter sets the stage for understanding who falls into which group—and why.
We are standing near the end of the early AI boom.
The story is about to shift.
Not toward collapse.
Not toward doom.
But toward sorting.
The next chapters will explore:
Chapter 9 — Cloud & Smartphone Era Lessons
What cloud computing and smartphones teach us about AI adoption, job transformation, S-curve platform shifts, and the birth of entirely new industries.
Chapter 11 — The First Set of Winners: Compute & Infrastructure Giants
Why NVIDIA, TSMC, Broadcom, and ASML will dominate the first decade of the AI revolution.